Global economic recovery is under way but slowly - report

27 October 2009 17:30  [Source: ICIS news]

WASHINGTON (ICIS news)--A global economic recovery is unmistakably under way but the return to normal growth rates will be unusually sluggish, a leading US manufacturing association said on Tuesday.

The Manufacturers Alliance said in its quarterly economic outlook that “Recent data paint an unmistakable picture that a global economic recovery is in progress”.

However, the alliance cautioned, “the rebound could be unusually sluggish and disproportionately catalyzed by a number of select emerging market nations, notably China, India and Brazil, which were less affected than industrialized countries by the global financial crisis”.

Alliance economist Cliff Waldman noted that “signs of normalization continue to appear in the financial and economic environments” and that “the foundations for a renewed period of global growth are increasingly evident as the world pivots from crisis to at least some semblance of stability”.

The global recovery will be sluggish, Waldman said, in part because “US consumers have been financially shocked into a higher savings rate”. 

That is a good development for long-term stability, Waldman noted, but as US consumers build their savings accounts and hold back on spending, “that saps a key source of US and global strength just when it is needed to help pull the world economy out of an especially difficult period”.

US consumer spending is the principal driving force for the nation’s economy, and a major driver for worldwide commerce, accounting for as much as 70% of US business activity.

The recovery also is likely to be slow, Waldman said, because at some point the US and other central banks will have to apply the brakes on money flow “as near-zero interest rate policies are unsustainable”.

The alliance said US exports of goods and services will likely show a nearly 12% contraction for this year but then recover to 5.7% growth in 2010 and accelerate to nearly 8% growth in 2011.

While industrialized nations can expect to see gross domestic product (GDP) growth of 2% to 2.5% beginning next year and into 2011, the alliance outlook said, GDP in developing economies of China, India and Brazil could average growth rates of 3.5% in 2010 and rise to near or at 5% in the following year.

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By: Joe Kamalick
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